James Montier one of the foremost experts on behavioral finance, recently penned a document titled
Is Austerity the Road to Ruin. In the piece Montier discusses the debate between austerity measures, and more fiscal stimulus.
For all unfamiliar with Montier here is a brief bio- James Montier is a member of GMO's asset allocation team. Prior to that, he was the co-Head of Global Strategy at Société Générale and has been the top-rated strategist in the annual Thomson Extel survey for most of the last decade. Montier is the author of four market-leading books,Behavioural Finance: Insights into Irrational Minds and Markets
,Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance
, andValue Investing: Tools and Techniques for Intelligent Investment
,The Little Book of Behavioral Investing: How not to be your own worst enemy
Tools and Techniques for Intelligent Investment.
Montier thinks the propenents of austerity are mistaken and more action is needed to prevent deflation. Montier believes Bernanke has done an excellent job in trying to induce inflation through monetary policy. Montier quotes Olivier Blanchard and Carlo Cottarelli who have suggested the following Ten Commandments for fiscal adjustment in developed economies:
Commandment II: You shall not front-load your fiscal
Is Austerity the Road to Ruin by James Montier
Disclosure: None
Is Austerity the Road to Ruin. In the piece Montier discusses the debate between austerity measures, and more fiscal stimulus.
For all unfamiliar with Montier here is a brief bio- James Montier is a member of GMO's asset allocation team. Prior to that, he was the co-Head of Global Strategy at Société Générale and has been the top-rated strategist in the annual Thomson Extel survey for most of the last decade. Montier is the author of four market-leading books,Behavioural Finance: Insights into Irrational Minds and Markets
,Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance, andValue Investing: Tools and Techniques for Intelligent Investment,The Little Book of Behavioral Investing: How not to be your own worst enemy Tools and Techniques for Intelligent Investment.Montier thinks the propenents of austerity are mistaken and more action is needed to prevent deflation. Montier believes Bernanke has done an excellent job in trying to induce inflation through monetary policy. Montier quotes Olivier Blanchard and Carlo Cottarelli who have suggested the following Ten Commandments for fiscal adjustment in developed economies:
Commandment I: You shall have a credible medium-term fiscal plan with a visible anchor (in terms of eitheran average pace of adjustment, or of a fi scal target to beachieved within four to five years).
Commandment II: You shall not front-load your fiscal
adjustment, unless financing needs require it.
Commandment III: You shall target a long-term declinein the public debt-to-GDP ratio, not just its stabilizationat post-crisis levels.Commandment IV: You shall focus on fiscal
consolidation tools that are conducive to strong potential
growth.
Commandment V: You shall pass early pension and
health care reforms as current trends are unsustainable.
Commandment VI: You shall be fair. To be sustainable
over time, the fiscal adjustment should be equitable.
Commandment VII: You shall implement wide reforms
to boost potential growth.
Commandment VIII: You shall strengthen your fiscal
institutions.
Commandment IX: You shall properly coordinate
monetary and fiscal policy.
Commandment X: You shall coordinate your policies
with other countries
Below is the full document in scribd. For best viewing, view in fullscreen mode.
Below is the full document in scribd. For best viewing, view in fullscreen mode.
Is Austerity the Road to Ruin by James Montier
Disclosure: None
